> For the complete documentation index, see [llms.txt](https://safu-protocol.gitbook.io/safu/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://safu-protocol.gitbook.io/safu/safu-0.1.md).

# SAFU 0.1

**Objective**: The primary objective of this Minimum Viable Product (MVP) is to test core dynamics of the Yield Distribution Framework prior to the activation of slashing on the Eigen Layer. This launch aims to validate foundational mechanisms and establish a preliminary structure to assess risk and yield distribution within a controlled environment.

**Background**

Since Eigen Layer slashing is not yet live, SAFU V1 will operate with a limited pool of collateralized assets. The current lack of slashing capabilities limits the total amount of assets deposited as collateral. However, with over $11 billion on Eigen Layer available and actively seeking yield opportunities, the SAFU MVP is created in order to test market driven dynamics and  core added value of SAFU (insurance for certain users and real yield to others..real yield),  pave the way for a robust, fully integrated product upon Eigen Layer's slashing activation.

**Overview of SAFU V1 Mechanics**

The MVP will simulate the full mechanics of the SAFUprotocol as follows:

1. **Insurance Pool with Liquid Restake Tokens (LRTs)**
   * Users can deposit Liquid Restake Tokens (LRTs), collateralized on Eigen Layer and actively traded on decentralized exchanges (DEXs) with ample liquidity.
     * LRTs retain a market price due to their liquidity and liquidation capabilities on lending markets. These tokens can be slashed based on predefined insurance conditions on Eager V1.
   * In the event of a slashing condition, the nominal amount of LRTs slashed will fund the "insured token" minted on SAFU, enabling a reallocation of slashed collateral to fulfill insurance claims.
2. **"Insured" Users**
   * Users seeking coverage can deposit sUSDe ( APY of 13%)., a stable asset from Ethena, to earn an insured version, safuUSDe (sacrificing 20% of that 13% yield)
   * Yield Distribution: 20% of Ethena's yield will be directed to LRT depositors within the insurance pool, compensating them as the insurance providers.
3. **Depeg Protection Mechanism**

   * Should USDE (Ethena stablecoin) experience a sustained depeg (sustained over 24 hours), esUSDe holders may claim an amount equivalent to the depeg, denominated in ETH, from the insurance pool of LRTs.
   * If the USD value of LRTs in the insurance pool falls below the sUSDe value held in the protocol, all LRTs in the pool will be subject to slashing to cover insured users' claims. (aka SAFU enables to provide the fair insurance priced by the market at all times..and that means that it doesn't necessarily provides 100% insurance at all moments)

## ESafu Protocol Vault (Version 0.1): sUSDe/eEth Market Overview

This initial version of the SAFU Protocol Vault offers two primary options for users:

1. **sUSDe Insurance**:
   * **How it Works**: Users can deposit either USDC or sUSDe to receive an safuUSDe token, a yield-bearing, receipt token that offers enhanced stability compared to Ethena's original sUSDe.
   * **Yield Sacrifice**: In exchange for increased security, users will initially forfeit 20% of the generated yield.
   * **Collateralization**: The insurance level of safuUSDe is dynamic and will adjust based on the amount of eEth that is restaked in the vault.
2. **Yield Earning on eEth through Insurance Provision**:
   * **Insurance Role**: eEth holders can earn additional yield by providing insurance coverage to sUSDe holders. By doing so, they act as a safeguard if USDe deviates by more than 1% from Ethena’s pegged value.
   * **Risk and Yield Dynamics**: The specific risk exposure and yield generated will depend on the balance between sUSDe deposited by sUSDe holders and eEth contributions to the insurance vault.

This version of SAFU Protocol is designed to bring flexibility, security, and yield options to sUSDe and eEth holders, while EigenLayer slashing mechanisms are pending.

### How we plan to approach more subjective and complex insurance policies?

**Claim Submission and Dispute Resolution**

* Users will have access to a "Claim" button to initiate a claim, which requires a 10k bond to proceed.
* A 24-hour period follows claim submission, during which any party can challenge the claim by referring it to Kleros.
* Kleros will evaluate the claim based on the insurance conditions and objective events (i.e., confirmation of sUSDe depegging). If unchallenged, the slashed LRTs will be distributed proportionally to esUSDe holders.

<figure><img src="/files/XAXLRXaCF7JJwYbchMj8" alt=""><figcaption><p>0.1</p></figcaption></figure>